Amazon (AMZN) said customers have purchased about 1 million Kindle e-book readers and tablets every week for the past three weeks. Amazon is estimated to sell 5 to 6 million Kindle Fires by the end of the year.
Since launching the Kindle Fire tablet 11 weeks ago at a $199 price point, which analysts expect to be at or below cost, Amazon has faced some strong pressure on its profit margins.
According to the average analyst estimate compiled by Bloomberg, Amazon’s operating margin may narrow to 0.7% this quarter from 3.66% in the year-earlier period.
Investors fear the low profit will hurt the company well into next year, a sentiment that caused a significant drop in stock price. At its height in mid-October, Amazon hit a record $246.71. Today share price rests around $182.
Despite losing money on tablet sales “Susquehanna Financial Group LLLP said Nov. 15 that each machine may generate a total of $384 in revenue for the company, including money spent on books, videos and other content.” (via Reuters)
A Shift Towards E-Commerce?
“Concern about Amazon profit was exacerbated this week when Best Buy Co (BBY) reported lower-than-expected earnings, hurt by heavy promotional activity this holiday season,” reports Reuters.
Indeed, heavy promotions hurt many retailers this season, and Amazon will not be an exception. “Amazon competes with Best Buy on sales of consumer electronics, and the Internet giant is known to aggressively match or beat rivals’ prices,” says Chad Bartley, of Pacific Crest Securities.
On the other hand, Best Buy reported their online retail sales were better than its traditional (in store) business – data that suggests the market has shifted towards e-commerce. That could certainly benefit Amazon, which holds the title of #1 Internet retailer.
Interesting in comparing Best Buy and Amazon, two leaders in electronic sales?
Use Kapitall’s tools, starting with the Compar-O-Matic to see how analyst expectations have changed for these companies over time.
Next, press play on the Turbo-Chart to see the company’s performance against the S&P 500 index. Click on the charts to access more tools on Kapitall.com.
Written by Rebecca Lipman. Author owns shares of AMZN.